OCDO) leads FTSE 100, surges up 6.7% on Tuesday

Involved in operating an online grocery supermarket, Ocado Group Plc (LON: OCDO) was leading the London Stock Exchange’s top 10 gainers on Tuesday. The OCDO stock price rose by 6.7%, leading the FTSE 100 index.

What is the financial performance of OCDO?

With a market cap of £4.5B, this mid-cap firm reported its yearly revenue as £2.5B in 2022; the company was profitable till the gross profit was reported as £629M. The company is bleeding its cash in the operations as the earnings before interest and taxes (EBIT) are negative after paying off the general expenses.

Due to the negative net income, profitability ratios like return on equity and earnings per share (EPS) are also deficient. This fund-sucking situation has reduced the cash and equivalents on the balance sheet to a significant level. The debt-to-equity ratio is also high at 1.20, indicating that the firm may face problems with debt solvency.

Lack of results

When a firm is burying funds in operations, it is usually the decision made by the management to increase the sales output; however, in the case of Ocado, this decision of heavy reinvestments isn’t in much favor. Despite the heavy reinvestments from 2017, the firm can only generate a compound growth rate of 11%, far from the industry rate of 24.6% in the same period.

The OCDO stock price is in a downtrend after the bears reclaimed the significant resistance level of £879 at the end of August. Currently, the OCDO stock price is trying to reverse the trend as the bulls are trying to reclaim the support level of £528.

The relative strength index (RSI) is slightly in the oversold zone of 40 but will eventually rise with the stock price. The 50-day exponential moving average price is £688 while the 150-day average is £659.

The price prediction for the current stock price has some good buying volumes. However, the bulls must sustain past £692 to reverse the bearish trend. If the bears can reclaim that supply zone, the price will move to the support level again.

Conclusion

Ocado Group Plc (LON: OCDO) surged to a significant level on Tuesday. The company is making slow growth despite heavily reinvesting in its operations. The stock price came in a bearish trend after the bears reclaimed a significant resistance level. The current price is on the verge of making a trend reversal as the price prediction is bullish.

Technical Levels

Support: £528, and £399

Resistance: £692, and £879

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks comes with a risk of financial loss.